Forex: USD awaits the Fed, GBP rose against the hopes of a delay to the Brexit

October 28, 2019

The u.s. dollar reached its highest level in two weeks against the yen on Monday, before a long-anticipated meeting of the federal Reserve later in the week, while hopes of an extension of a Brexit have boosted the pound sterling.

The dollar was up 0.1% to 108,72 against the yen at 09h55, close to the top of 108,94, its highest level since 1 August.

The Fed is expected to present its third rate reduction in as many meetings on Wednesday, and it was included in the price, but some analysts expect that the Fed is being hawkish by signalling its unwillingness to continue to reduce its rates.

Investors are also awaiting a monetary policy meeting of the Bank of Japan on Thursday. The BoJ has a tendency to want to maintain policy on hold, but the decision is tight, as policy makers struggle against the threats which weigh on the global outlook arising from the trade war chinese american and Brexit.

“A reduction of the Fed funds rate is already taken into account, but the dollar could be redeemed if the Fed indicates not to reduce rates further,” said Yukio Ishizuki, strategist foreign exchange at Daiwa Securities in Tokyo.

“Until we can confirm it, the traders will adjust probably their existing positions in us dollars”.

The dollar index, the gauge of the greenback against a basket of six major currencies, was 97,51, under the highest of a week.

The euro has pushed higher against the dollar, up 0.12 per cent to 1,1092.

The pound sterling was also up against the greenback, up 0.1% to 1,2833 and was little changed against the euro at 0,8642.

The demand for pound sterling was supported by an agreement expected later on Monday to postpone the divorce of the United Kingdom of the European Union at 31 January, after Prime minister Boris Johnson has failed to obtain the approval of its schedule for the Brexit.

More than three years after the Uk has voted by referendum in favour of leaving the EU, the country and its legislature remain divided on the manner, time and place of their departure. This case has sparked a political crisis without precedent in the United Kingdom.